LIC gets RBI nod to increase stake in HDFC Bank to 9.99%; lender's shares in green

Shares of private sector lender HDFC Bank traded over 1 per cent higher on Monday (January 29) after the Reserve Bank of India (RBI) gave a nod to Life Insurance Corporation (LIC) to acquire a 9.99 per cent stake in HDFC Bank.

At around 9:23 a.m., shares of HDFC Bank traded 1.40 per cent or Rs 20.10, higher at Rs 1455.4 apiece. Meanwhile, at around the same time, LIC shares flat at Rs 903.3 apiece. Both scrip closed over 1 per cent higher.

"Life Insurance Corporation of India ("LIC") has accorded its approval to LIC for acquiring aggregate holdings up to 9.99 per cent of the paid-up share capital or voting rights of HDFC Bank Limited," the filing read.

The approval has been granted with reference to the application made by LIC to RBI, it added. LIC currently holds a 5.19 per cent share of HDFC Bank.

Further, the insurance behemoth has been advised by the RBI to acquire the aforesaid major shareholding in the bank within a period of one year, i.e., by January 24, 2025. Additionally, LIC must ensure that the aggregate holding in the bank does not exceed 9.99 per cent of the paid-up share capital or voting rights of the bank at all times.

Under RBI regulations, any acquisition of 5 per cent or more of paid-up share capital in a private sector bank or voting rights therein will require prior approval of the RBI. These provisions will also apply to small finance banks.

In a bank, specified entities who are fit and proper can hold up to 5 per cent without RBI approval. Any subsequent hike in stake requires regulatory approval, which LIC sought as its stake post-merger exceeded 5 per cent.

HDFC Bank and LIC share price: Past performance

In a year, HDFC Bank shares have lost over 9 per cent, underperforming the Nifty50's rise of over 22 per cent. Meanwhile, LIC shares have gained over 40 per cent in a year.

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